France Telecom yesterday moved to get 100 per cent control of Wanadoo, the internet service provider which owns Freeserve in the UK as well as a Yellow Pages directory business in France.
The French telecoms company, which owns 71 per cent of Wanadoo, has offered about €3.9bn (£2.6bn) for the rest of the shares - a deal which values the entire unit at about €13bn.
The offer, made up of shares or cash or a mix of both, mirrors France Telecom's move from last year to buy out the minority shareholders in its mobile phone operation Orange.
Like other European telecoms firms, France Telecom is trying to increase revenues from new services, such as broadband, while its core business of offering fixed-line telecoms services remains under pressure from competition. By owning 100 per cent of its subsidiaries, France Telecom can access all of their cash flows.
But the company plans to get more upside from this transaction by floating off Wanadoo's Yellow Pages business in the second quarter of the year.
Thierry Breton, France Telecom's chief executive who was hired to restore the business to financial health, said: "Reintegrating Wanadoo is fundamental to our broadband strategy on fixed lines to offer more services to our clients for fast Internet access."
France Telecom is offering seven of its own shares and €195 for every 40 Wanadoo shares. There is also a cash-only deal of €8.86 a share as well as a stock-only deal of seven France Telecom shares for 18 Wanadoo shares.